Investment Opportunities for Pension Funds in Ghana

Ghana’s pension funds, both public and private, have become a significant source of long-term capital, offering immense potential for economic growth and development.

With the implementation of the National Pensions Act, 2008 (Act 766), which established the three-tier pension system, pension funds in Ghana have grown substantially.

As of the last quarter of 2024, the total assets under management by Ghana’s private pension funds stood in excess of GHS 60 billion, and the public funds stood in excess of GHS 20 billion, creating enormous opportunities for strategic investments that can deliver sustainable returns while contributing to national development.

It is estimated that by the end of 2025, pension funds could hit GHS 100 billion in total. That puts pension funds in pole position to take advantage of key real and potential investment opportunities, considering the fact that Ghana is a growing economy.

Ghana faces a significant infrastructure deficit, particularly in transportation, energy, housing, and healthcare. Pension funds can play a pivotal role in financing infrastructure projects through public-private partnerships (PPPs) or direct investments.

For instance, funds can be channelled into road construction, affordable housing projects, and renewable energy initiatives such as solar and wind farms. These investments not only provide stable, long-term returns but also address critical developmental needs.

The previous NPP government gave up on road toll collection in favour of e-levy, but the present NDC administration has given a clear indication of reinstating it and looking for viable financing opportunities to maximise income generation for the nation’s road fund. This is where pension funds can take full advantage of either through PPP or direct investments.

Ghana is in a deprived situation of infrastructural deficit, as the demand for affordable housing far exceeds supply, creating a lucrative opportunity for pension funds.

Investments in residential and commercial real estate can yield attractive returns, especially in urban centres like Accra, Kumasi, and Takoradi. Pension funds can partner with real estate developers to construct housing units or invest in real estate investment trusts (REITs) to diversify their portfolios.

In this regard, the public sector schemes belonging to public sector workers such as teachers, doctors and nurses are in a good position to partner with banks and other financial institutions to take advantage of investment in real estate for their contributors.

The government of Ghana’s domestic debt restructuring through its exchange programme in 2022 and 2023 has dented investor confidence; however, bonds and treasury bills still remain a safe and reliable investment option for pension funds within the traditional asset classes. These instruments provide fixed-income returns and are backed by the government, making them low-risk. Pension funds can also explore green bonds, which are increasingly being issued to fund environmentally sustainable projects. Pension funds can take comfort from the fact that the GHS 30 billion which was at risk in the last DDEP was excluded, thus reducing the risks associated with this asset class.

Pension funds can invest in private equity and venture capital funds that support small and medium-sized enterprises (SMEs) in Ghana.

SMEs are the backbone of the economy, contributing significantly to employment and GDP. By investing in high-growth sectors such as technology, agriculture, and manufacturing, pension funds can earn substantial returns while fostering economic growth.

Agriculture remains a key sector of Ghana’s economy, contributing about 20% of GDP. Pension funds can invest in agribusiness ventures, including large-scale farming, agro-processing, and agricultural technology. These investments can help modernise the sector, improve food security, and generate stable returns.

Ghana’s commitment to increasing renewable energy in its energy mix presents an attractive opportunity for pension funds. Investments in solar, wind, and hydroelectric projects can provide long-term, inflation-adjusted returns while supporting the country’s transition to clean energy.

The growing demand for quality healthcare and education services in Ghana offers another avenue for pension fund investments. Funds can be directed towards building hospitals, clinics, schools, and vocational training centres. These investments not only generate returns but also contribute to social development. This can be done by syndication of pension funds in collaboration with a government agency, such as GETFUND, in the case of schools or NHIA, in the case of hospitals. This syndication of pension funds for projects will also involve a bank of a bilateral development finance institution.

Another area within the alternative asset class is technology and innovation, as Ghana’s tech ecosystem is rapidly expanding, with startups in fintech, e-commerce, and digital services gaining traction. Pension funds can invest in technology-driven businesses or venture capital funds focused on innovation. These investments have the potential for high returns as the digital economy grows. Pension funds can team up with the National Entrepreneurship and Innovation Programme (NEIP) to provide an integrated national support base for investment in start-ups and small businesses.

Pension funds can align their investments with environmental, social, and governance (ESG) principles by funding projects that promote sustainability and social impact. Examples include green infrastructure, affordable housing, and community development initiatives, as well as investment in renewable energy and green bonds.

Pension funds in Ghana have a unique opportunity to drive economic growth while securing long-term returns for retirees. By diversifying their portfolios and investing in sectors such as infrastructure, real estate, agriculture, and renewable energy, pension funds can contribute to national development while achieving their financial objectives. However, careful risk management and regulatory oversight are essential to ensure the sustainability of these investments. With the right strategies and the National Pensions Regulatory Authority (NPRA) keeping a regulatory eye on its investment guidelines, Ghana’s pension funds can become a catalyst for transformation in the economy.

By: Hayford Kwesi Atta Krufi 

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